How To Build Your Credit Score From Scratch

Woman buying online with credit card and a tablet sitting in the garden at home in holiday, Online Shopping Concept.
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Credit is a funny thing. It’s hard to get if you really need it, but easy to get if you don’t. In other words, building your credit score in the first place is challenging, but once you’ve done so, you’ll be in good shape. But how do you build your credit score if you can’t get credit in the first place? Here’s what you need to know.

How To Build Credit with a Credit Card

A credit card is often the best way to get started building your credit. Apply for a card with a low limit – and just apply for one. Lenders will pay attention to the number of accounts you apply for, so just apply for one to start with. If you get the card, you’re off to a good start.

If you are declined for the credit card you applied for, you still have some options. There are a couple of things you can do.

Apply for a Secured Credit Card

This is a credit card that is backed by a cash deposit that you make, equal to the credit limit of the card. That cash stays on deposit with the lender for as long as you have the card. You use the card like any other credit card – you use it for purchases, and then you pay the balance when it’s due.

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The difference is that, if you don’t make your payment, the lender has your deposit to protect their interest. But if they have to dip into the deposit, your credit rating will suffer. A secured card is a temporary measure – once you’ve built up your credit, you’ll be able to qualify for an unsecured card.

Get a Co-signer

If someone with good credit is willing to co-sign your credit card application, you may qualify for an unsecured card. The co-signer needs to understand that they’re responsible for paying the bill if you don’t, however.

Be an Authorized User on Someone Else’s Card

If a family member has a credit card in good standing, they can add you as an authorized user. You will get your own card, and the credit history of the account will be reflected on your credit report. Make sure the card issuer reports the activity of authorized users to the credit bureaus. Have a conversation with the owner of the credit card about paying for the items you purchase using the card and be sure to stick to your end of the bargain.

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Get a Secured Loan

This is like a secured credit card – you put down a deposit equal to the amount of the loan, then pay the loan according to its terms. Once the loan is paid off, you get your deposit back, plus – hopefully – a shiny new credit score.

Continue To Build Credit With a Car Loan

Once you’ve gotten your first credit card, it may not be long before you will qualify to buy or lease a car. When you do, the better credit you have, the better interest rate you’ll get. And if you’re buying rather than leasing, consider getting your auto loan from a bank – preferably one you already do business with – rather than the dealer.

Their interest rate will usually be lower, and you’ll know just how much you can spend before you get to the dealership. This could help prevent you from buying a car that’s more expensive than you can actually afford.

Make Sure To Stay On Top Of Your Credit

Once you’ve got a credit card and a car loan, you should be in good shape, as long as you pay all your bills on time. Credit reporting agencies will report on late payments on your mortgage, car loans, credit cards, and so on. But lenders can also ask to see your credit history for things like utilities. So don’t commit to any bills you cannot pay on time, every month.

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This means coming up with an accurate budget. Know how much income you have coming in and how much you have to pay out in bills. Be sure to factor in some savings for the inevitable emergency.

What Goes Into Determining Your Credit Score?

There are five factors that go into determining your credit score. They are:

  • Your payment history: 35%
  • The amount you owe on all your accounts: 30%
  • The length of your credit history: 15%
  • Your credit mix: 10%
  • New credit: 10%

The percentages are a guide – some categories matter more for some people than others. For example, for younger borrowers, the length of your credit history may be less important than it would be for someone older.

Payment history will always be the most important factor, so make sure you pay all your bills on time. You can’t go back in time, so if you’ve had late payments in the past, start making all your payments on time today.

It will take some time to change things like your payment history and the length of your credit history. But you can take some action that will have an immediate impact on your new credit and the amount you owe on all your accounts. Here’s how.

What Impacts Building New Credit?

New credit looks at the number of accounts you have recently opened. If you’ve just gotten three new credit cards, the issuer of the fourth card you apply for isn’t going to like that. Apply for a single card, and then wait before you apply for additional credit. And if you know you’ll be looking for a car loan, don’t take out a credit card right before you try to qualify.

If you have some cash, you can also impact the amount you own on all your accounts. Pay off what you can before applying for more credit. But don’t close the accounts. Part of the calculation of what you owe takes into account the amount of available credit you have.


You have two credit cards, each with a limit of $5,000. One is maxed out, the other has a $2,500 balance. So, you are using 75% of your available credit on those two cards. If you pay off the $2,500 balance but keep the account open, you’re now using 50% of your available credit. If you close the account, you now have a $5,000 balance on a card with a $5,000 limit, so you’re using 100% of your available credit. Lenders would much rather see 50% credit usage than 100%.

It takes time to build – or rebuild – a good credit score. But establishing good credit not only creates good financial habits, but it will also end up saving you money. Those with a good credit score benefit from better interest rates on a mortgage, car loan, and more.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

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About the Author

Karen Doyle is a personal finance writer with over 20 years’ experience writing about investments, money management and financial planning. Her work has appeared on numerous news and finance websites including GOBankingRates, Yahoo! Finance, MSN, USA Today, CNBC,, and more.
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